Helping Debt-Laden Graduates Maintain Coverage During the Pandemic –and Pay Off Loans
NEW YORK, NY—July 9, 2020—New York State could go a long way towards helping out this year’s pandemic-challenged graduates—facing a tough job market, the potential loss of health insurance, and looming student loan repayments—by enacting a tax credit for health insurance premiums that would be tied to student debt payments, according to a HealthWatch report released today by United Hospital Fund (UHF).
Under the plan, student debtors applying for health coverage through the NY State of Health Marketplace could deduct the amount of their monthly loan payments from their modified adjusted gross income, used to calculate Affordable Care Act advanced premium tax credits. The reduced income might then reposition them lower on the income scale and make them eligible for deeper subsidies and lower premiums.
“This modest program targeted at New Yorkers with student loan debt would send a strong message in difficult and uncertain times, helping young borrowers stay current with their insurance payments and stay healthy by enrolling in coverage,” said Peter Newell, director of UHF’s Health Insurance Project and author of the report, A Gift for 2020 Grads: Enhanced Premium Subsidies for Student Loan Debtors.
Graduates from the class of 2020 face a daunting future as they set out in a terribly damaged economy. Over 2.8 million New Yorkers filed for unemployment insurance between March and June, and in April regional unemployment rates in New York ranged from a low of 13.2% to a high of 21.9%. On top of diminished job prospects, many new graduates are losing school-sponsored health coverage, will be aging off their parents’ policies, or might have lost coverage when a parent lost a job—adding to the estimated 410,000 New Yorkers between the ages of 19 and 34 who are already uninsured.
Paying for health insurance will be even more difficult once student loan payments for most borrowers start coming due this fall. Student loan debt in New York was $6,180 per capita in 2019, the sixth highest in the nation. A 2016 report from the New York State Comptroller cited over 2.8 million student loan borrowers in the state, and a recent survey reported an average debt per New York borrower of $31,523.
The report lays out various scenarios under the enhanced tax credit proposal for hypothetical purchasers of insurance, based on the NY State of Health Marketplace coverage options. In all the scenarios, individuals with student loan debt would see lower premiums. The biggest beneficiaries would be borrowers with salaries that push them past the current the ACA ceiling for subsidies, combined with high monthly debt payments. For example, a graduate with a Master’s degree, an annual salary of $60,900 (too high for tax credit eligibility), but monthly loan payments totaling $800 would see their monthly premium reduced by 35 %. There would be smaller savings for graduates with less loan debt and salaries already low enough for subsidies.
“New York State faces daunting challenges from the COVID-19 pandemic and the resulting economic damage,” said Mr. Newell. “State policymakers will have to make choices among many competing and dire needs, but a targeted approach to young adults starting out their careers—a valuable addition to the individual market risk pool—should be on the table, and could soon prove its worth.”
The HealthWatch report, made possible through the support of The New York Community Trust, can be downloaded from UHF’s website here.
United Hospital Fund
United Hospital Fund works to build a more effective health care system for every New Yorker. An independent, nonprofit organization, we analyze public policy to inform decision-makers, find common ground among diverse stakeholders, and develop and support innovative programs that improve the quality, accessibility, affordability, and experience of patient care. For more on our initiatives and programs please visit our website at www.uhfnyc.org and follow us on Twitter.